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Indonesia’s Bakrie group sheds Bumi stake


November 2, 2008

Indonesia’s Bakrie group sheds Bumi stake

Indonesia's Bakrie & Brothers Tbk said it would raise $1.3 billion from the sale of a stake in coal miner Bumi Resources to repay debt, a move that may restore some confidence in the country's battered stock market, reported Reuters.

Bakrie & Brothers, which has interests in energy, property and telecoms, has been struggling to raise over $1 billion to repay short-term debt amid global financial market turmoil.

Concerns about the group's financial health contributed to a sharp sell-off in Indonesia's stock market .JKSE, prompting the authorities to close the exchange for three days last month.

Bakrie & Brothers, controlled by the family of Indonesia's chief social welfare minister Aburizal Bakrie, said on Saturday investment group Northstar Pacific would buy a 35 percent stake in Bumi, Indonesia's biggest coal-mining firm, for $1.3 billion.

Northstar Pacific is run by Indonesian banker Patrick Walujo, a former Goldman Sachs banker, and has a joint venture with U.S. buyout firm TPG Capital.

"The transaction documents have been signed last night and the buyer is Northstar. The transaction has been decided by all of us here, in the management, with the aim to solve the company debts," Ari Hudaya, a director of Bakrie & Brothers, told a press conference.

Reuters reported on Oct. 17 that Indonesian private equity firm Northstar and US hedge fund Farallon Capital were among the potential buyers for a stake in Bumi, citing sources close to the deal.

Last month, other sources close to the matter told Reuters Credit Suisse was arranging a new loan package for the Bakrie group.

Bakrie officials declined to say whether Northstar was the sole buyer, or leading a consortium of other firms. A couple of state-owned coal and mining companies had also expressed some interest in buying Bumi.

Bakrie & Brothers said in a statement that the proceeds would be used to settle all outstanding debt ahead of schedule in response to the current "irrational" market conditions.

The firm did not give details of the price per share, and said the deal is subject to approvals.

Based on the market value of Bumi at that time, a 35 percent stake would be worth $1.386 billion, and the $1.3 billion price tag announced on Saturday would mark a 6.2 percent discount to the shares last traded level.

Aburizal Bakrie until recently was ranked the country's richest man. It was unclear whether the entire 35 percent stake was owned by Bakrie group companies and whether this means Bakrie no longer owns any shares in Bumi.

Until recently, the Bakrie group of companies typically accounted for a substantial proportion of daily trading volume and market value.

Bumi briefly flirted with being the biggest stock listed in Jakarta, but its share price has fallen 64 percent since Jan 1, bringing its market cap down to just $3.96 billion, while the benchmark stock index .JKSE is down 54 percent amid a global equity market rout.

Trading in the shares of Bakrie & Brothers, Bumi Resources, and Energi Mega Persada has been suspended since Oct. 7, pending a resolution of the group's debt repayment.

Other companies in the group include Bakrie Telecom, Bakrie Sumatera Plantations and property firm Bakrieland Development.

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